It’s currently early in the academic year, when newly graduated medical students finally get a paycheck, and newly minted attendings finally receive their “Doctor Salary” income.
I think it’s worth reviewing the ways in which the sticker price of a purchase is not the same as the full cost of ownership.
I may have mentioned, once or twice already, that I am thinking about buying a second car.
While I won’t say that price is no object, I will say that I don’t have a strict budget in mind. We want an SUV, which costs more than a subcompact, and some bells and whistles. In addition, everything has gotten more expensive in the past few years, especially cars.
Newer cars cost more to insure, and to keep legal. Auto insurance, inspection, registration, taxes: all of these cost money.
When your car is new and shiny, you might choose to pay more to keep it looking that way: a safe place to park, car washes, etc. I would probably get a parking lease at work so I could drive myself in a few times a week (or daily, when I work on the in-patient side).
I estimate all this will add up to an extra $200 a month, not counting fueling costs (gas and/or electricity) or a car loan (I’m not expecting to use one).
That is not insurmountable at this stage of my financial life, but it is not insignificant, either.
There are quite a few other purchases whose total cost is much more than the initial purchase price.
Housing, of course, is the big money pit.
I own my house free and clear, and still pay plenty over the year for taxes, insurance, utilities, maintenance, minor improvements. It might be as much as 10% of my salary. (Just typing that makes me feel a little nauseated).
Off the top of my head, I can think of some other purchases that end up being more expensive than you might plan for:
- Private schools. After tuition, you have fundraisers, alumni appeals, special programs.
- Country clubs. Depending on the type, you may have bigger entertainment bills (why throw a party at home if you have a club?), special assessments, greens or court fees.
- A home pool. Maintenance, water bills, possibly a safety fence, and definitely higher insurance premiums.
- A dinner out. There’s the bill, and then the tax and tip. Maybe parking, or even a babysitter. Suddenly that becomes expensive.
You can do this sort of cost analysis ad infinitum, if you choose, and drop into absurdity.
After all, those groceries you buy have to be cleaned/chopped/cooked, and then the dishes need to be washed and leftovers (if any) disposed of. That all costs time and money.
You still need to eat, so at some point you can leave these arguments behind.
You are allowed to eat out, or install a home pool if you desire (and have the room), send your children to private school if you think that’s best, drive a newer car and live in a home you own. There are definite pluses to some of these spending decisions.
Just don’t fool yourself that the sticker price is the only money you’ll be paying for them. Budget accordingly.
What have you bought that ended up costing you more to own than you expected? Were you still happy with the purchase anyway?